Life Lessons From The Wealthy

Barry Ritholtz' latest from the Washington Post struck a nice philosophical cord this week with the title being 7 Life Lessons From The Very Wealthy. Some of it was common sense like don't leverage yourself up as much as you are able to and some was more about self awareness issues like not being so focused on goals that you focus solely on the destination without enjoying the journey.

Also interesting to me was the idea that to the rich memories matter more than possessions. We all know people with large house payments, giant TVs, expensive cars, a large motor home (or boat) and a couple of $10,000 toys to go with the motor home or boat (ATVs or jet skis or both). That is of course a lot stuff and a lot of monthly payments that have to be covered.

Reasonably speaking the more moving parts (payments) in someone's financial life the more stressers in someone's overall life.

One of the seven that I really have trouble relating to is "having goals is incredibly important." Personally I have very few goals, perhaps this is evidence of too much focus on the journey and not enough on the destination?

There is a difference between the desire to be comfortable relative to modest needs versus being really rich (obviously). People who try to get really rich from their portfolio would seem likely to end up taking inappropriate risks and learning their risks were inappropriate after some unfortunate incident. Very few people are the type of world class investor that will lead them to be really rich. However a lot more people can be moderately successful in their careers, be aggressive savers, maybe have the puck bounce their way a few times (Bruins reference) and end up with a couple of million saved (I'm not saying this would be easy but this can happen for far more people than becoming really rich in the market).

The $80,000 that $2 million would generate (assumes the 4% rule) is not extravagant but could be plenty comfortable for someone who has avoided a big mortgage and a bunch of expensive toys.

This stuff gets into some serious behavioral issues. Many people with large monthly nuts realize they have large monthly nuts but don't see where they could possibly cut back. We were watching an episode of House Hunters the other night. The couple looked to be about my age (maybe a couple of years older), had a huge windfall from selling their home on Oahu and planned to roll that into much more home on Fiji. House #2 had a black and white kitchen that she could not live with (to the point of being very upsetting to her) for this house on the beach in Fiji and the only way should could be happy was gutting that kitchen--House #2 was about $1 million cheaper than the other two. Not gutting what looked like a fine kitchen was a conversation she could not hear.

People would solve a lot of their problems if they took an introspective look at some of their assumptions and recalibrated. I don't think people can hear that from someone else, the need to discover this on their own.